Capital Gains
I am trying to understand this capital gains tax.
I want to sell my primary residence that I have own/lived in for 1yr and 7months. I will make $30k from this sale. I will take this money and buy a piece of land to build my next primary residence. Will I have to pay capital gains tax on the $30k since I am putting it back into a piece fo property and not pocketing it? If so how much normally would they take from the $30k? If I put it into my next residence as a down payment and they tax it then will they tax it again if I sell that piece in less than two years?
Thanks[ Edited by willisch on Date 09/25/2004 ]
Best bet is to wait 3 more months. Why are you selling now?
Read this article that I wrote to answer many of your questions:
http://comm.thecreativeinvestor.com/modules.php?name=News&file=article&articleid=415
Quote:I want to sell my primary residence that I have own/lived in for 1yr and 7months. I will make $30k from this sale. I will take this money and buy a piece of land to build my next primary residence. Will I have to pay capital gains tax on the $30k since I am putting it back into a piece fo property and not pocketing it?There is no requirement to reinvest the proceeds from the sale of your primary residence to exclude your sale profits from capital gains taxes. You qualify for the exclusion by satisfying the two year OWNERSHIP and OCCUPANCY rules.
Quote:If so how much normally would they take from the $30k?The maximum long term capital gain tax rate is 15% if your tax bracket is at least 25%. If you are in a lower tax bracket, then your capital gain tax rate is 5% for the amount of your profit that keeps your total taxable income in the 15% tax bracket.
Quote:If I put it into my next residence as a down payment and they tax it then will they tax it again if I sell that piece in less than two years?Any money you reinvest in your next primary residence is after tax income. That money you reinvest is included in your cost basis and will not be taxed again. Any PROFIT you make when you sell your next primary residence in less than two years is taxed as a capital gain.
By the way, Frogger mistyped. You need to occupy your home for at least five more months to qualify for the capital gains exclusion.[ Edited by NewKidinTown2 on Date 09/25/2004 ]